It's a tale of two different megacaps so far this earnings season when it comes to artificial intelligence.
Meta Platforms surged more than 10% after showing signs that AI investments are boosting the bottom linewhile Microsoft shares dropped as the company struggled to justify recent spending plans to investors and showed a slowdown in its cloud segment.
The money flowing into AI and new technology has been a major source of debate on Wall Street as investors increasingly want to see that companies are reaping rewards from the massive spending over the last year.
Meta appeared to gain approval from investors to keep putting money into AI. The social media giant issued strong guidance and said it plans to spend between $115 billion and $135 billion on its AI build-out this year.
That's nearly double what it spent in 2025.
In past quartersinvestors have raised concerns over the company's ambitious spending. Howeverthe company's 24% year-over-year revenue growthfueled primarily by online advertisingseemed to ease previous worries about its AI strategy.
CEO Mark Zuckerberg suggested the company is working on a range of new products this year and said investments would support his mission for "building personal super intelligence."
The social media giant added more than $176 billion in market value.
But while investors seemed to reward Meta's spending plansMicrosoft's stock plummeted 10% and lost more than $357 billion in market capitalization. Shares suffered their worst day since March 2020.
The software maker showed slowing growth in its Azure cloud segmentwhich declined to 39% growth from 40% growth in the company's first fiscal quarter. Investors closely watch the segment as a stand-in for measuring enterprise AI demand.
At the same timecapital expenditures and finance leases in the quarter jumped 66% to $37.5 billionsurpassing the $34.31 billion expected by analysts polled by Visible Alphaas Microsoft supports demand for its cloud and AI segments.
The company also said its struggling with compute capacity constraints as demand continues to outweigh supply.
Microsoft finance chief Amy Hood said Azure would have grown 40% if the company had funneled all of its new graphics processing unit chips in the first and second quarter into its Azure business.
She also said the company is balancing having "incoming supply better meet growing Azure demand" with product innovation and growing first-party AI usage in services like GitHub Copilot and M365 Copilot.
The company's demand backlog rose to $625 billionup 110%which included a $250 billion cloud agreement with OpenAI during the period. The ChatGPT maker accounted for 45% of its commercial remaining performance obligations.
Analysts at Evercore ISI said "concerns about OpenAI's ability to meet funding commitments" likely contributed to the post-earnings stock spiral but called the sentiment "overblown."
Beyond Big Tech
The contrasting AI-fueled moves bled into the broader technology sector.
IBM gained a wave of confidence from investors in its AI strategywith shares rising 5%. The technology and consulting company topped expectations and showed strong software and infrastructure growth as it builds out new automation tools and AI infrastructure.
Analysts at Goldman Sachs said the software and infrastructure growthcoupled with market share gains in consultingput the company on "track to complete its pivot to long-term growth."
MeanwhileIBM's AI book of business more than doubled to $12.5 billion from $5 billion a year ago. That growth seemed to justify the company's investments.
Analysts at JPMorgan called IBM a "relatively defensive name with increasingly favorable exposure to Software and AI tailwinds."
Yet ServiceNow shares dropped 10% as concerns that AI is eating away at the broader software sector's business model overshadowed the company's better-than-expected earnings. Its stock has declined 25% already since the start of 2026 and 50% over the last year.
The sector has sold off in recent months on worries that new AI tools will deteriorate demand for their workflows and licenses and put a dent in long-standing revenue models.
During an earnings call with analystsServiceNow CEO Bill McDermott defended the company's business model and recent multibillion acquisition spreewhich some investors had flagged as a sign that the company is trying to restart growth.
"Let's clear it up with the facts," he said. "Enterprise AI will be the largest driver of return on the multitrillion-dollar supercycle of investment in AI infrastructure."
